NEW YORK (TheStreet) -- Shares of Marvell Technology (MRVL) - Get Report were falling 16.6% to $7.88 in morning trading on Tuesday after the chipmaker announced that PricewaterhouseCoopers resigned as its auditor on October 20.
In an SEC filing Marvell said that its audit committee did not request, recommend, or approve PwC's resignation.
PwC told Marvell that it will need to expand the scope of its 2016 audit in four areas:
- Entity level controls, including whether senior management's operating style resulted in an open flow of information and communication to set an appropriate tone for an effective control environment.
- Process and controls over establishment of significant and judgmental reserves, including reserves for litigation and royalties.
- Process and controls over identification, communication and approval of related party transactions, including assignment of intellectual property rights.
- The adequacy of financial reporting resources, including sufficient personnel with appropriate knowledge, expertise and training commensurate with the company's corporate structure and financial reporting requirements.
Due to its resignation, PwC did not undertake to expand the scope of the audit.
In a note to investors, MKM Partners downgraded Marvell to "neutral" from "buy" following the announcement. The analyst firm highlighted uncertainty in the timeline and outcome around Marvell finding a new auditor, implementing a 2016 audit of acceptable scope for investors, and catching up on delayed filings.
About 25.1 million shares of Marvell were traded by 10:43 a.m. Tuesday, above the company's average trading volume of about 8 million shares a day.
TheStreet Ratings team rates MARVELL TECHNOLOGY GROUP LTD as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
We rate MARVELL TECHNOLOGY GROUP LTD (MRVL) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. At the same time, however, we also find weaknesses including deteriorating net income, a generally disappointing performance in the stock itself and feeble growth in the company's earnings per share.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- MRVL, with its decline in revenue, underperformed when compared the industry average of 13.4%. Since the same quarter one year prior, revenues fell by 26.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- MARVELL TECHNOLOGY GROUP LTD has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MARVELL TECHNOLOGY GROUP LTD increased its bottom line by earning $0.84 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 33.9% in earnings ($0.56 versus $0.84).
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 27.92%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 374.07% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income has significantly decreased by 375.4% when compared to the same quarter one year ago, falling from $138.87 million to -$382.43 million.
- You can view the full analysis from the report here: MRVL